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Shell Canada Limited v Alberta (Energy), 2023 ABCA 230

Link to Decision Summarized

Oil – Judicial Review/Appeal

Appeal

This was an appeal by the Alberta Minister of Energy (“Minister” or “Appellant”) from an Alberta Court of King’s Bench order on judicial review. The judicial review judge quashed the Minister’s screening decision refusing to convene a dispute review committee (“DRC”) under the Mines and Minerals Dispute Resolution Regulation (“DRR”) to review a royalty dispute between the Minister and Shell Canada (“Shell” or “Respondent”). The main issue in the dispute was the disallowance by the Minister of certain costs claimed by Shell.

The judicial review judge found that the Minister’s screening decision was unreasonable and quashed the decision. The judicial review judge also declared that the Minister must convene a DRC in accordance with the provisions of the DRR. The judicial review judge also identified the question to be put to the DRC.

On appeal, the Minister submitted that the judicial review judge: (i) failed to apply a reasonableness standard when reviewing the Minister’s screening decision; and (ii) erred in the selection of remedy by granting mandamus without grounds usurping, on the grounds of expediency, the Minister’s discretion to screen out new issues.

Decision

The appeal was dismissed, subject to modifications to the declarations granted by the judicial review judge.

Pertinent Issues

Standard of Review

The ABCA noted that its task on an appeal from a judicial review decision is to determine whether the judicial review judge correctly identified and applied the appropriate standard of review, which accords no deference to the judicial review judge’s application of the standard of review. The ABCA agreed with the parties that the standard of review when reviewing the Minister’s decision was reasonableness.

The ABCA held that the Minister misinterpreted the issue that was before the judicial review judge. According to the court, the question was not whether the Minister’s interpretation of the regulations was reasonable but whether it was reasonable for the Minister to conclude that Shell’s position was “frivolous, vexatious or without merit.” If Shell’s position was not without merit, then the DRR mandates the question be referred to a DRC to consider both positions and make recommendations to the Minister.

The Minister provided very brief reasons for her conclusion that Shell’s position was without merit.  The ABCA held that the Minister’s reasons did not disclose the reasoning process that led to that conclusion, failed to address the context and purpose of the regulations and, as a result, the decision did not bear the “the hallmarks of reasonableness — justification, transparency and intelligibility” in accordance with Canada (Minister of Citizenship and Immigration) v. Vavilov. The ABCA, therefore, dismissed the appeal from the order quashing the Minister’s screening decision that Shell’s position was without merit.

Error in the Choice of Remedy

The judicial review judge quashed the Minister’s screening decision but declined to remit the matter back to the Minister for reconsideration. In doing so, the judicial review judge noted that the Minister took almost three years to respond to Shell’s request that a DRC be convened, and expressed concerns about the additional time that would pass, if the matter were returned to the Minister. He made the following declarations: (i) the Minister must convene a DRC in accordance with the provisions of the DRR; and, (ii) the question to be put to the DRC was whether the costs disallowed by the Energy Department’s auditor on the basis that they were not ‘solely dedicated,’ were allowed costs according to the Oil Sands Allowed Costs (Ministerial) Regulation, interpreted as a whole.

The ABCA saw no error in the judicial review judge’s determination that remitting the matter back to the Minister to consider whether to convene a DRC would serve no purpose. The ABCA also agreed with the judicial review judge that it was appropriate for him to set out the question to be referred to the DRC rather than remitting that issue back to the Minister because of the Minister’s delay in responding to Shell’s request.

In considering this delay, the ABCA noted that, while there is no express deadline for the Minister to provide notice that the request for a DRC meets all requirements or to specify the matters in dispute, the process deadlines set out in the DRR are designed to ensure an expeditious process. That design was inconsistent with a 3-year delay for the Minister to confirm the request satisfied the necessary requirements and to specify the matters in dispute. The judicial review judge was entitled to grant this declaratory relief. The ABCA, however, reworded the first declaration to better reflect its declaratory nature to read: “Shell is entitled to the establishment of a Dispute Review Committee in accordance with the provisions of the Dispute Resolution Regulation.”

The Minister also objected that the judicial review judge’s question for the DRC broadened the scope of the dispute beyond that initially raised by Shell. Having regard to the correspondence between the parties, the ABCA found that the judicial review judge erred in principle in his formulation of the issue referred to the DRC by expanding the scope of the dispute beyond what was reasonably within the contemplation of the parties. The ABCA, therefore, revised the question to be put to the DRC to read: “Whether the subject costs disallowed by the Energy Department’s auditor on the basis that they were not ‘Solely Dedicated’ are allowed costs the Oil Sands Allowed Costs (Ministerial) Regulation, interpreted as a whole.”

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